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 LOUISVILLE, Ky., Sept. 29 /PRNewswire/ -- Rally's Hamburgers (NASDAQ: RLLY) today announced that it has settled a lawsuit with International Shortstop Inc., and as a result, has recorded an unusual one-time charge against earnings of $2.0 million, or $.10 per share, in the third quarter. Additionally, advertising and promotion expenses will be $2.0 million, or $.10 per share, higher in the third quarter than previously projected. The company has also made the decision to incur a one-time charge of $1.0 million, or $.05 per share, for previously deferred intangible and other assets associated with the development of new restaurants or acquisition of new markets. Management also anticipates charges totaling $500,000 or $.03 per share, to reflect an increase in its income tax provision ($140,000) and to establish an accrual for write-offs of assets to be replaced in remodeling certain of its restaurants ($360,000).
 Rally's has been in litigation with International Shortstop since 1989 and believes that it has claims against third parties as a result of this litigation and settlement. The company will seek to recover all or part of the settlement amount from those parties. However, no amounts have been reflected in the company's financial statements for any such possible recovery.
 Exclusive of the one-time charges of $3.0 million and other charges of $2.5 million approximated above, earnings results are expected to be below analysts' earnings estimates of $.23 to $.25 per share for the third quarter and $.78 to $.85 per share for the year.
 Expansion plans in 1993 have been slower than expected largely because of management's decision to enhance the quality of its new sites and to change its development plans to fewer, but more concentrated markets. This has resulted in lower-than-anticipated operating margins in certain of its less developed markets and higher than anticipated general and administrative costs. Management now expects to build 60 new company owned restaurants in 1993 (exclusive of acquired or closed restaurants), an increase of 62 percent compared with company- owned restaurants built in 1992, but below the previous estimated 105 new company-owned restaurants.
 Randy Laney, senior executive vice-president and chief financial officer, said, "We share the disappointment in anticipated performance. Notwithstanding today's announcement, I remain excited about the future. Rally's has a winning concept and has assembled a talented group of employees to move us forward. We are now developing the fundamental changes we believe appropriate to establish the best opportunity of positive and consistent growth in restaurants and earnings."
 Laney recently joined Rally's Hamburgers after 23 years with Wal- Mart, most recently serving as their vice president, finance and treasurer. Laney added, "While the circumstances that led to this quarter's disappointing results necessitate expedient action, our focus is also on developing a well planned strategy that we believe will provide us the best opportunity for continued improvement in performance over the next 12 months. Many successful companies have erred by growing too fast, but the really good companies are able to identify and address the problems growth often brings. Many of our core markets are performing well, we serve a hamburger that is ranked No. 1 in food quality and good value, but, more importantly, we are committed to being the best."
 -0- 9/29/93
 /CONTACT: Randy Laney, Senior Executive VP and CFO, 502-245-8900/

CO: Rally's Hamburgers ST: Kentucky IN: LEI SU: ERP

EH-MF -- LA023 -- 6950 09/29/93 16:12 EDT
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Publication:PR Newswire
Date:Sep 29, 1993

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